When the Entire Contract Is Conditioned on Something Else Occurring

question 32

Multiple Choice

When the entire contract is conditioned on something else occurring first,the first event is called a[n] ________.

• A)Advance.
• B)Condition precedent.
• C)Foregoing condition.
• D)Foreseeable event.
• E)Preceding condition.

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Definitions:

Earnings

The net profits of a company after all expenses have been deducted from revenues.

Earnings Reinvested

Profits that are not paid out as dividends but are instead reinvested in the business to fund growth or pay down debt.

Retention Rate

A metric indicating the percentage of earnings not paid out as dividends but retained by the company for reinvestment.

Plowback Ratio

The proportion of the firm’s earnings reinvested in the business (and therefore not paid out as dividends). The plowback ratio equals 1 minus the dividend payout ratio.